Stock shortage drives CBD sales

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THE Selected Growth Property Trust has paid $28 million for an
11-storey office building at 440 Elizabeth Street to complete one
of the largest acquisitions in the Melbourne CBD this year.

The premises are believed to be the first asset in the Selected
Growth Property Trust, which is a joint venture between Melbourne
businessmen Max Fremder and Ron Lasarovits.

Mr Fremder and Mr Lasarovits plan to make further acquisitions
for the trust, which will be sold to private investors.

The property sold on a yield of 8.76 per cent after a Kliger
Wood tender campaign attracted almost 100 inquiries from some of
the nation's largest listed property trusts and investment
syndicates.

The building has 13,812 square metres of floor space, large
floor plates of 1650 sq m and five retail premises at street
level.

The 15-year-old property was owned by the Australian
Manufacturing Workers Union, which at present occupies two levels
of the building and will enter into a new one-year lease with a
six-month option from the date of completion of the sale
contract.

The building is also tenanted by RMIT and Australian Air
Express, while one floor remains vacant.

Kliger Wood director Eugene Wood said the building had a
projected net income of about $2.8 million on a fully leased basis,
which represented an indicative yield of 9.75 per cent.

He said the new owner would receive substantial depreciation
benefits, which had been calculated by property and construction
consultants Napier Blakeley at $16.6 million, over the next 10
years.

"The level of inquiry has been quite staggering and underscored
the insatiable demand for investment-grade property in the CBD.

"We have a number of unsatisfied players and the difficult part
is finding stock for them," Mr Wood said.

Meanwhile, an office building of 3200 sq m, at 350 Williams
Street, has sold for more than $13 million, after being on the
market for more than 12 months.

The two-storey building opposite the Flagstaff Gardens was owned
by law firm Holding Redlich, which will continue to lease the
premises.

The firm bought the building and a neighbouring warehouse in
1996 from AMP in a joint tender with a developer for $3.725
million. Fitzroys is believed to have negotiated the sale, although
director Peter Weatherby refused to comment yesterday.

The robust state of Melbourne's CBD market was affirmed by the
Spring 2005 Office Market Indicators Report from Colliers
International, which forecast a continued fall in vacancy rates and
incentives, while rents are set to rise.

Colliers associate director of investment sales Martin
O'Sullivan said soaring demand from institutions, syndicates and
private investors had contributed to a compression of yields to
about 7 per cent, while capital values now averaged between $4500
and $6000 per square metre for premium-grade stock.

"Most of the negative sentiment generated by the high level of
construction over the past couple of years has been reversed by the
good leasing market and the consequent fall in vacancy levels," Mr
O'Sullivan said. "New investors will now have to pay a premium to
existing property owners, who have weathered the tough leasing
market over the past couple of years."